Canada's balance of international payments

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First quarter 2011 (Previous release)

Canada's current account deficit (on a seasonally adjusted basis) with the rest of the world declined for the second consecutive quarter to reach $8.9 billion in the first quarter, led by a larger goods surplus. The $1.4 billion decline in the current account deficit was largely attributable to strong export volumes of energy products.

 Current account balances

In the capital and financial account (unadjusted for seasonal variation), the purchase of Canadian securities by foreign investors slowed in the quarter, but continued to account for most of the inflows to Canada. These purchases, almost equally split between Canadian bonds and stocks, were the lowest recorded in a year.

Current account

Goods surplus expands further, reflecting strong exports to the US

The overall surplus on the trade in goods widened in the first quarter to $1.7 billion, up $1.3 billion from the previous quarter. Trade with the US accounted for all of the gains, as the goods deficit with other countries increased in the quarter. The goods surplus with the US expanded to its highest level since the third quarter of 2008, notably on much higher exports of energy products.

Note to readers

Annual and quarterly data have been revised for the reference years 2008 to 2010. This is in keeping with the general policy to revise national accounts statistics at the time of the first quarter data release. In general, the revisions reflect more current sources of information coming from annual surveys and administrative data.

The balance of international payments covers all economic transactions between Canadian residents and non-residents in two accounts, the current account and the capital and financial account.

The current account covers transactions in goods, services, investment income and current transfers.

The capital and financial account mainly comprises transactions in financial assets and liabilities.

In principle, a current account surplus/deficit corresponds to an equivalent net outflow/inflow in the capital and financial account. In practice, as international transactions data are compiled from multiple sources, this is rarely the case and gives rise to measurement error. The statistical discrepancy is the unobserved net inflow or outflow.

For more information about the balance of payments, consult the "Frequently asked questions" section in the National economic accounts module of our website. The module also presents the most recent balance of payments statistics.

 Goods balances by geographic areas

Exports of goods advanced $4.8 billion in the first quarter, led by energy products. Exports of crude petroleum were up $3.6 billion, with two-thirds of the increase attributable to record volumes. Automobiles were up $0.8 billion, offsetting the decline in the previous quarter. Industrial goods continued to rise, but at slower pace than that of the fourth quarter, which had been strong. Reduced exports of machinery and equipment (-$1.0 billion) as well as agricultural and fish products dampened the growth in the exports of goods.

Imports of goods increased $3.5 billion in the first quarter, following a small reduction in the previous quarter. Automotive products rebounded $1.9 billion, as a result of higher volumes for cars, trucks and parts. Energy products were up $1.2 billion, mostly led by higher crude petroleum prices. Imports of machinery and equipment were largely unchanged, as lower prices were offset by stronger volumes.

Services deficit widens, led by travel

The deficit on trade in services was up $0.2 billion in the first quarter, largely on Canadian travel to the United States. Increased numbers of Canadians crossed the border, with the Canadian dollar above parity with the American dollar, such that travel payments to the United States rose to $5.0 billion. Conversely, fewer Americans visited Canada and receipts from US travellers fell to their lowest level in 14 years. Receipts from overseas were also down in the quarter. Overall, the travel deficit reached a high of $4.2 billion in the first quarter.

The transportation services deficit edged up, reflecting higher volumes of imported goods. Exports of commercial services were up slightly, further expanding the recent modest surplus.

Deficit on investment income little changed

The investment income deficit narrowed by $0.4 billion in the first quarter. Receipts advanced again, but at a slower pace than in the previous quarter, while payments were down slightly. On the receipt side, Canadian direct investors' earnings from abroad were up slightly in the first quarter, largely in the energy sector. Interest and dividends received on foreign securities edged down, extending a downward trend observed over most of the last two years.

On the payment side, the earnings of foreign direct investors edged up in the first quarter. The energy and finance sectors posted marginal declines, while most other industries recorded increases. Following six quarters of increase, payments of interest and dividends on portfolio investments were somewhat lower, as the Canadian dollar rose against the US dollar. In particular, interest paid to foreign holders of Canadian corporate and provincial government bonds was down, as a significant part of bonds in these two sectors are issued in US dollars.

Capital and financial account

Foreign acquisition of Canadian securities slows

Non-residents added $21.8 billion of Canadian securities to their portfolios in the first quarter, and, while still significant, this level of acquisition was the lowest in a year. Foreign acquisitions over the quarter were almost equally split between debt instruments and equities. Foreign investment in Canadian bonds slowed to the lowest level since the fourth quarter of 2008, while investment in stocks continued to strengthen.

 Foreign portfolio investment in Canada

Foreign acquisitions of $11.8 billion of Canadian bonds were equally split between government and corporate bonds in the first quarter. Non-residents added $4.5 billion of federal bonds to their holdings, a ninth quarter of investment in such instruments. Foreign purchases of Canadian corporate bonds reflected activity in mortgage-backed securities. On a currency basis, foreign inflows in the Canadian bond market were focused in Canadian dollar-denominated instruments. By quarter-end, the Canadian dollar had increased 2.6 cents US from December 2010.

Non-residents acquired $9.3 billion of Canadian equities in the first quarter, largely shares from the energy and metallic minerals sector. For the one-year period ending March 31, 2011, non-residents added $27.9 billion of Canadian shares to their holdings. During the same period, Canadian stock prices increased by nearly 16%, and reached levels last seen in the first half of 2008.

Canadian investors return to the US stock market

Canadian investors purchased $2.9 billion of foreign securities in the first quarter. They resumed the pattern of adding foreign stocks and removing foreign debt instruments from their holdings, following a brief reversal in the fourth quarter. Activity in foreign stock markets was focused on US shares, with purchases of $3.8 billion of these instruments. Meanwhile, Canadians removed non-US foreign stocks from their holdings for a second straight quarter. US stock prices increased 5.6% in the first quarter and reached their highest level since May 2008.

The reduction in Canadian holdings of foreign debt instruments in the first quarter was concentrated in US bonds, more specifically US government short-term bonds. This was partially offset by acquisitions of non-US foreign bonds and US corporate paper. Activity in the maple bond market remained subdued, following three years during which Canadians reduced their holdings of these bonds by over $14 billion.

Foreign direct investment in Canada sustained

Foreign direct investment in Canada was $13.4 billion in the first quarter, up slightly from the previous quarter. However, in contrast to the activity in the fourth quarter, inflows resulting from foreign takeovers in Canada were up. The energy and metallic minerals sector attracted over 40% of the investment during the quarter. On a geographical basis, foreign direct investors from the United States and some emerging economies accounted for a large part of the activity in the first quarter.

 Foreign direct investment

Canadian direct investment abroad slows

Canadian direct investment abroad amounted to $13.1 billion in the first quarter, down from a high investment of $31.1 billion in the previous quarter. Cross-border merger and acquisition activity, although weaker than in the fourth quarter, accounted for 40% of the outflows. Canadian direct investors predominantly targeted the finance and insurance and the energy and metallic minerals sectors, largely in the United States and Australia.

Available on CANSIM: tables 376-0001 to 376-0017 and 376-0035.

Definitions, data sources and methods: survey numbers, including related surveys, 1534, 1535, 1536 and 1537.

The first quarter 2011 issue of Canada's Balance of International Payments (67-001-X, free) will be available soon.

The balance of international payments data for the second quarter will be released on August 30.

For more information, or to order data, contact Client Services (613-951-1855; To enquire about the concepts, methods or data quality of this release, contact Denis Caron (613-951-1861;, Balance of Payments Division.